Harare - Zimbabwe is squeezing the mining sector even tighter for more revenue and now wants to scrap tax incentives for the industry.

Mining executives in the country say the increased focus on an industry still in recovery mode is beginning to take a toll on the profitability prospects of mining firms.

Economists say investors are staying away from Zimbabwe, which has vast mineral deposits concentrated in the Great Dyke – a mineral-rich belt cutting across the country – because of its high-risk perception.

The Fraser Institute earlier this year identified Zimbabwe as being one of the worst mining jurisdictions in the world.

Investors and fund managers have complained of high taxation, an uncompetitive royalty and mining fee regime, as well as uncertainty in the regulatory framework.

But if all these issues are addressed, Zimbabwe’s mining industry – in which South African groups such as Metallon Gold, Impala Platinum, Aquarius Platinum and Anglo American Platinum are major players – will be able to attract massive investment of up to $15 billion (R156.4bn) by 2018, according to the World Bank.

Zimbabwe Mines and Mining Development Minister Walter Chidakwa said the mining industry had to abide by the statutes of the indigenisation policy, which aims to transfer ownership to locals. There have been indications from the government of lower compliance thresholds for sectors other than mining but there continue to be differing views on the policy from officials.

Chidakwa said the government was proposing a 3 percent new levy to go towards a state-owned exploration company, which is being set up to aid the country’s mineral securitisation programme.

The mining ministry has already written to all diamond mining companies in Zimbabwe, advising that they are required to sell their diamond output through the Reserve Bank of Zimbabwe.

“He just spoke off the cuff [regarding the new exploration levy] and we have no idea where this is coming from but I think it’s still up for further discussion,” said a mining executive who did not want to be named.

“But sometimes the government will already have made a position and they just want to hear what the industry will say.”

He added that a new levy would effectively raise the level of mineral fees in the country, saying “at this rate where fees and levies are introduced haphazardly, we may end up having the fees and levies adding up to 50 percent and then you wonder why we additionally have to comply with indigenisation” when companies were already contributing nearly half of their revenues to the state.

Zimbabwe is reportedly talking to investors, widely believed to be from China, about obtaining loans to be securitised by mineral resources, the true extent of which will be determined by the state exploration firm.

Kupukile Mlambo, the deputy governor of the Reserve Bank of Zimbabwe, said there was a need for the harmonisation of regulations in Zimbabwe. He said the indigenisation policy should be harmonised with investment promotion laws.

“We need to build investor confidence and we need to re-engage the international community. We need policy consistency because investors hate inconsistency,” he said.

Projections by the government and the Chamber of Mines show that Zimbabwe will produce 15 tons of gold this year, representing a marginal increase from last year’s output of 14 tons.

The chamber’s president and Zimbabwe Platinum’s chief executive, Alex Mhembere, said on Friday that the gold mining sub-sector was beginning to show signs of fragility owing to incessant operational constraints.

Industry executives said the limited growth that had been projected for mining could be attributed to challenges emanating from the operating framework and to increased revenue demands from the government, which had led to reduced capitalisation for expansion projects by mining firms.

Mhembere said it was important for Zimbabwe to have an investment climate that enabled growth through high returns.

“We must become a country that encourages investment and businesses making profits. It is therefore imperative for the government to improve clarity surrounding the indigenisation regulations to attract the critical foreign and domestic capital needed to develop the mining industry,” he said.

Monica Gotora, who works in the Harare office of accounting firm Deloitte, said the government should reconsider its position on withdrawing tax incentives for the mining sector. “We need them for the mining sector to grow,” she said.